Dividends on preferred and common stock Yosemite Bike Corp. manufactures mountain bikes and distributes them through retail outlets in California, Oregon, and Washington. Yosemite Bike Corp. has declared the following annual dividends over a six-year period ended December 31 of each year: Year 1, $24,000; Year 2, $10,000; Year 3, $126,000; Year 4, $100,000; Year 5, $125,000; and Year 6, $125,000. During the entire period, the outstanding stock of the company was composed of 25,000 shares of cumulative preferred 2% stock, $90 par, and 100,000shares of common stock, $4 par. Instructions 1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, Year1. Summarize the data in tabular form, using the following column headings: 2. Determine the average annual dividend per share for each class of stock for the six year period. Assuming a market price of $100 for the preferred stock and $5 for the common stock, calculate the average annual percentage return on initial shareholders’ investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.

BuyFind

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
BuyFind

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Solutions

Chapter 13, Problem 1PB
Textbook Problem

Dividends on preferred and common stock

Yosemite Bike Corp. manufactures mountain bikes and distributes them through retail outlets in California, Oregon, and Washington. Yosemite Bike Corp. has declared the following annual dividends over a six-year period ended December 31 of each year: Year 1, $24,000; Year 2, $10,000; Year 3, $126,000; Year 4, $100,000; Year 5, $125,000;

and Year 6, $125,000. During the entire period, the outstanding stock of the company was composed of 25,000 shares of cumulative preferred 2% stock, $90 par, and 100,000shares of common stock, $4 par.

Instructions

  1. 1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, Year1. Summarize the data in tabular form, using the following column headings:

Chapter 13, Problem 1PB, Dividends on preferred and common stock Yosemite Bike Corp. manufactures mountain bikes and

  1. 2. Determine the average annual dividend per share for each class of stock for the six year period.

Assuming a market price of $100 for the preferred stock and $5 for the common stock, calculate the average annual percentage return on initial shareholders’ investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.

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Chapter 13 Solutions

Financial Accounting
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